SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

United Community Banks, Inc.

(Exact name of registrant as specified in its charter)

Georgia		No. 0-21656		No. 58-180-7304
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

63 Highway 515, P.O. Box 398

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(706) 781-2265

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

 

 

Item 2.02 Results of Operation and Financial Condition

On April 18, 2006, United Community Banks, Inc. (the “Registrant”) issued a news release announcing its financial results for the quarter ended March 31, 2006 (the “News Release”). The News Release, including financial schedules, is attached as Exhibit 99.1 to this report. In connection with issuing the News Release, on April 18, 2006 at 11:00 a.m. EST, the Registrant intends to hold a conference call/webcast to discuss the News Release.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

99.1 Press Release, dated April 18, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		/s/ Rex S. Schuette
		Rex S. Schuette
		Executive Vice President and
April 18, 2006		Chief Financial Officer

EXHIBIT 99.1

For Immediate Release

For more information:
Rex S. Schuette
Chief Financial Officer
(706) 781-2265
Rex_Schuette@ucbi.com

UNITED COMMUNITY BANKS, INC. REPORTS
15% GAIN IN DILUTED EARNINGS PER SHARE
FOR FIRST QUARTER 2006

HIGHLIGHTS:

•

Record First Quarter Earnings

Diluted Earnings Per Share of $.39 — Up 15%
Net Income of $16 Million — Up 19%
Return on Tangible Equity of 17.66%
Total Assets Rise to $6.1 billion

•

Strong Loan Demand, Rise in Net Interest Margin and Fee Revenue Drove Performance

BLAIRSVILLE, GA, April 18, 2006 — United Community Banks, Inc. (Nasdaq: UCBI), Georgia’s third largest bank holding company, today announced record financial results for the first quarter of 2006. Compared with the first quarter of 2005, the company achieved a 21% increase in total revenue, a 19% rise in net income and a 15% gain in diluted earnings per share.

For the first quarter of 2006, net income rose to $16.0 million compared with $13.4 million a year earlier. Diluted earnings per share increased to $.39 from $.34 a year ago. Total revenue, on a taxable equivalent basis, was $68.0 million compared with $56.1 million for the first quarter of 2005. Return on tangible equity was 17.66% and return on assets was 1.09%, compared with 19.86% and 1.06%, respectively, a year ago.

“Demand for loans and deposits was strong across all markets, leading to excellent growth opportunities.” said Jimmy Tallent, President and Chief Executive Officer of United Community Banks. “This strong growth pushed total assets above $6 billion, a 15% increase from a year ago and a significant milestone for our company. Loans increased $186 million during the first quarter, or 17% on an annualized basis, and helped drive the increase in net interest revenue. We added $271 million of deposits this quarter, which more than funded our loan growth as we continued to focus on programs to grow core deposits. Our net interest margin rose to 4.33%, up 28 basis points from a year ago and up 13 basis points from last quarter, as increasing short-term interest rates continued to positively affect our slightly asset-sensitive balance sheet. Fee revenue was up 15%, reflecting increases in every category.”

At March 31, 2006, total loans were $4.6 billion, up $707 million, or 18%, from a year ago. All of the loan growth was organic, which included growth from a significant de novo expansion in Hall County, Georgia. “Organic growth, with an uncompromising focus on sound credit quality, is at the core of our balanced growth strategy and is further supported by our focused de novo expansion,” Tallent said. “We find the right people and build around them, usually adding two to four new offices a year. In the first quarter, we opened our fifth banking office in Hall County, a second location in Savannah and a commercial loan office in Jasper, which is located in Pickens County just north of Atlanta.” Tallent continued, “Ten months ago, we entered Gainesville by partnering with three local and highly respected banking executives to form United Community Bank — Hall County. Since opening for business in May of 2005, this team has added more than $280 million in loans and $170 million in deposits. We now have 85 staff and 5 banking offices, including the main office located in downtown Gainesville. It is a testimony to the success and strength of our existing franchise that we were able to reinvest earnings to absorb these significant de novo undertakings and still deliver on our primary financial goal of consistent, sustainable double-digit growth in earnings per share.”

“The first quarter continued a trend of outstanding deposit growth. We added $271 million of deposits and over half were core deposits,” Tallent said. “Our relentless focus on the highest level of customer service has generated customer satisfaction scores that continue to exceed 90%, well above the comparable industry average of 75%. This is invaluable in building

deposits through customer referrals while also maintaining and growing long-term relationships with existing customers.”

For the first quarter, taxable equivalent net interest revenue of $59.7 million was up $11.5 million, or 24%, from the first quarter of 2005. Taxable equivalent net interest margin for the first quarter was 4.33%, compared with 4.05% a year ago and 4.20% for the fourth quarter of 2005. “Our balance sheet has remained asset sensitive, which allowed us to benefit from the rise in interest rates that produced a slight margin expansion throughout 2005 and into the first quarter of 2006,” Tallent said.

The first quarter provision for loan losses was $3.5 million, up $1.1 million from a year earlier and equal to the fourth quarter of 2005. Annualized net charge-offs to average loans were 11 basis points for the first quarter, compared with 16 basis points for the fourth quarter of 2005 and 12 basis points for the first quarter of 2005. At quarter-end, non-performing assets totaled $8.4 million compared with $13.0 million at the end of the fourth quarter of 2005 and $13.7 million a year ago. Non-performing assets as a percentage of total assets were 14 basis points at quarter-end, compared with 22 basis points at December 31, 2005 and 26 basis points at March 31, 2005. “During the first quarter, our credit quality remained solid and we experienced a lower level of net charge-offs and non-performing assets. Asset quality continues to compare favorably with peer banks and can be somewhat volatile at these low levels,” Tallent said. “Strong credit quality, rooted with our guiding principle of securing loans with hard assets, is essential to our balanced growth strategy and overall success.”

Fee revenue of $11.8 million reflected an increase of $1.6 million, or 15%, from $10.2 million for the first quarter of 2005. “Fee revenue growth was achieved in every category,” Tallent stated. “Service charges and fees on deposit accounts increased $739,000 to $6.4 million, primarily due to growth in transactions and new accounts resulting from core deposit programs and ATM fees. Brokerage fees increased $408,000 to $850,000 due to strong market activity. Consulting fees of $1.6 million were up slightly, due to the growth in risk management services,” Tallent added.

Operating expenses of $42.2 million increased $7.4 million, or 21%, from the first quarter of 2005. Salaries and employee benefit costs of $27.6 million increased $5.4 million, or 24%, from the first quarter of 2005 due to an increase in staff to support our significant expansion efforts and business growth. Communications and equipment expenses increased $394,000 to $3.4 million due to further investments in technology equipment to support business growth. Advertising and public relations expense rose $525,000 to $1.9 million reflecting the continuing cost of initiatives to raise core deposits and ongoing efforts to generate brand awareness in new markets. Occupancy expense increased $264,000 to $2.9 million reflecting the increase in cost to operate additional banking offices added through de novo expansion. Postage, printing and supplies expense increased $165,000 to $1.5 million reflecting the higher cost of office supplies and courier costs resulting from the growing franchise. The increase in other operating expense was due to higher lending related costs and other expenses related to business growth. “Our operating efficiency ratio of 59.06% for the quarter is within our long-term efficiency goal of 58% to 60%, reflecting the continued strength of our existing franchise, strong revenue growth and disciplined expense controls, which more than offset the costs of reinvesting for the future through our recent expansion efforts,” Tallent said.

“Our outlook for 2006 is for operating earnings per share growth within our long-term goal of 12% to 15%, which includes dilution related to the equity offering completed during the fourth quarter of 2005 and expensing of stock options,” Tallent said. “We anticipate core loan growth will to be at the upper-end of our targeted range of 10% to 14%. Our net interest margin has benefited from rising short-term interest rates; however, we expect these rates to level-off and our margin could decrease slightly in the second half of 2006, due to further pricing competition for deposits. Our outlook assumes a stable economic environment and continued strong credit quality.”

“We are committed to excellent customer service, superior operating performance and solid credit quality as we continue our efforts to build shareholder value through our balanced growth strategy of strong internal growth, complemented by selective de novo and merger expansion,” Tallent added.

Conference Call
United Community Banks will hold a conference call on Tuesday, April 18, 2006, at 11 a.m. ET to discuss the contents of this news release, as well as business highlights for the quarter and the financial outlook for the remainder of 2006. The telephone number for the conference call is (866) 356-4279 and the pass code is “UCBI.” The conference call will also be available by web cast within the Investor Relations section of the company’s web site at ucbi.com.

About United Community Banks, Inc.
Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. As of March 31, 2006, United Community Banks had assets of $6.1 billion and operated 24 community banks with 93 banking offices located throughout north Georgia, metro Atlanta, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses. United Community Banks also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq National Market under the symbol UCBI. Additional information may be found at the company’s web site at ucbi.com.

Safe Harbor
This news release contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. These statements are provided to assist in the understanding of future financial performance and such performance involves risks and uncertainties that may cause actual results to differ materially from those in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled “Forward Looking Statements” on page 4 of United Community Banks, Inc. annual report filed on Form 10-K with the Securities and Exchange Commission.

(Tables Follow)

UNITED COMMUNITY BANKS, INC.
Selected Financial Information
For the Three Months Ended March 31, 2006

																						First
		2006				2005																Quarter
(in thousands, except per share		First				Fourth				Third				Second				First				2006-2005
data; taxable equivalent)		Quarter				Quarter				Quarter				Quarter				Quarter				Change
INCOME SUMMARY
Interest revenue		$	102,797			$	95,465			$	89,003			$	80,701			$	73,649
Interest expense			43,065				38,576				34,033				29,450				25,367
Net interest revenue			59,732				56,889				54,970				51,251				48,282				24	%
Provision for loan losses			3,500				3,500				3,400				2,800				2,400
Fee revenue			11,758				11,373				12,396				12,179				10,200				15
Total revenue			67,990				64,762				63,966				60,630				56,082				21
Operating expenses			42,222				40,520				41,294				38,808				34,779				21
Income before taxes			25,768				24,242				22,672				21,822				21,303				21
Income taxes			9,729				9,012				8,374				8,049				7,862
Net income		$	16,039			$	15,230			$	14,298			$	13,773			$	13,441				19
PERFORMANCE MEASURES
Per common share:
Basic earnings		$	.40			$	.39			$	.37			$	.36			$	.35				14
Diluted earnings			.39				.38				.36				.35				.34				15
Cash dividends declared			.08				.07				.07				.07				.07				14
Book value			12.09				11.80				11.04				10.86				10.42				16
Tangible book value (2)			9.25				8.94				8.05				7.85				7.40				25
Key performance ratios:
Return on tangible equity (1)(2)(3)			17.66	%			18.20	%			18.90	%			19.21	%			19.86	%
Return on equity (1)(3)			13.25				13.30				13.42				13.46				13.68
Return on assets (3)			1.09				1.05				1.01				1.03				1.06
Net interest margin (3)			4.33				4.20				4.17				4.12				4.05
Efficiency ratio			59.06				58.80				61.16				61.18				59.47
Dividend payout ratio			20.00				17.95				18.92				19.44				20.00
Equity to assets			8.04				7.69				7.46				7.65				7.71
Tangible equity to assets (2)			6.24				5.82				5.53				5.62				5.58
ASSET QUALITY
Allowance for loan losses		$	55,850			$	53,595			$	51,888			$	49,873			$	48,453
Non-performing assets			8,367				12,995				13,565				13,495				13,676
Net charge-offs			1,245				1,793				1,385				1,380				1,143
Allowance for loan losses to loans			1.22	%			1.22	%			1.22	%			1.22	%			1.25	%
Non-performing assets to total assets			.14				.22				.24				.24				.26
Net charge-offs to average loans (3)			.11				.16				.13				.14				.12
AVERAGE BALANCES
Loans		$	4,505,494			$	4,328,613			$	4,169,170			$	3,942,077			$	3,797,479				19
Investment securities			1,038,683				1,004,966				1,008,687				996,096				946,194				10
Earning assets			5,574,712				5,383,096				5,239,195				4,986,339				4,819,961				16
Total assets			5,960,801				5,769,632				5,608,158				5,338,398				5,164,464				15
Deposits			4,613,809				4,354,275				4,078,437				3,853,884				3,717,916				24
Stockholders’ equity			478,960				443,746				418,459				408,352				398,164				20
Common shares outstanding:
Basic			40,088				39,084				38,345				38,270				38,198
Diluted			41,190				40,379				39,670				39,436				39,388
AT PERIOD END
Loans		$	4,584,155			$	4,398,286			$	4,254,051			$	4,072,811			$	3,877,575				18
Investment securities			983,846				990,687				945,922				990,500				928,328				6
Earning assets			5,633,381				5,470,718				5,302,532				5,161,067				4,907,743				15
Total assets			6,070,596				5,865,756				5,709,666				5,540,242				5,265,771				15
Deposits			4,748,438				4,477,600				4,196,369				3,959,226				3,780,521				26
Stockholders’ equity			485,414				472,686				424,000				415,994				398,886				22
Common shares outstanding			40,119				40,020				38,383				38,283				38,249

UNITED COMMUNITY BANKS, INC.
Consolidated Statement of Income
For the Three Months Ended March 31,

		Three Months Ended
		March 31,
(in thousands, except per share data)		2006				2005
Interest revenue:
Loans, including fees		$	90,365			$	63,467
Investment securities:
Taxable			11,318				9,014
Tax exempt			514				525
Federal funds sold and deposits in banks			158				259
Total interest revenue			102,355				73,265
Interest expense:
Deposits:
Demand			7,187				3,527
Savings			228				168
Time			25,386				13,008
Total deposit interest expense			32,801				16,703
Federal funds purchased, repurchase agreements, & other short-term borrowings			1,476				885
Federal Home Loan Bank advances			6,629				5,657
Long-term Debt			2,159				2,122
Total interest expense			43,065				25,367
Net interest revenue			59,290				47,898
Provision for loan losses			3,500				2,400
Net interest revenue after provision for loan losses			55,790				45,498
Fee revenue:
Service charges and fees			6,353				5,614
Mortgage loan and other related fees			1,513				1,483
Consulting fees			1,584				1,482
Brokerage fees			850				442
Securities losses, net			(3	)			—
Other			1,461				1,179
Total fee revenue			11,758				10,200
Total revenue			67,548				55,698
Operating expenses:
Salaries and employee benefits			27,643				22,235
Communications and equipment			3,376				2,982
Occupancy			2,932				2,668
Advertising and public relations			1,888				1,363
Postage, printing and supplies			1,516				1,351
Professional fees			1,161				1,038
Amortization of intangibles			503				503
Other			3,203				2,639
Total operating expenses			42,222				34,779
Income before income taxes			25,326				20,919
Income taxes			9,287				7,478
Net income		$	16,039			$	13,441
Net income available to common stockholders		$	16,034			$	13,434
Earnings per common share:
Basic		$	.40			$	.35
Diluted			.39				.34
Weighted average common shares outstanding (in thousands):
Basic			40,088				38,198
Diluted			41,190				39,388

		March 31,				December 31,				March 31,
(in thousands, except per share data)		2006				2005				2005
ASSETS
Cash and due from banks		$	150,378			$	121,963			$	98,502
Interest-bearing deposits in banks			12,259				20,607				21,677
Cash and cash equivalents			162,637				142,570				120,179
Securities available for sale			983,846				990,687				928,328
Mortgage loans held for sale			18,455				22,335				34,628
Loans, net of unearned income			4,584,155				4,398,286				3,877,575
Less — allowance for loan losses			55,850				53,595				48,453
Loans, net			4,528,305				4,344,691				3,829,122
Premises and equipment, net			120,021				112,887				105,188
Accrued interest receivable			41,895				37,197				30,519
Intangible assets			118,149				118,651				120,119
Other assets			97,288				96,738				97,688
Total assets		$	6,070,596			$	5,865,756			$	5,265,771
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Deposits:
Demand		$	653,624			$	602,525			$	541,690
Interest-bearing demand			1,277,434				1,264,947				1,120,284
Savings			176,205				175,453				177,051
Time deposits:
Less than $100,000			1,308,698				1,218,277				1,007,313
Greater than $100,000			1,029,464				895,466				618,028
Brokered deposits			303,013				320,932				316,155
Total deposits			4,748,438				4,477,600				3,780,521
Federal funds purchased, repurchase agreements, & other short-term borrowings			167,369				122,881				154,633
Federal Home Loan Bank advances			510,602				635,616				785,382
Long-term debt			111,869				111,869				111,869
Accrued expenses and other liabilities			46,904				45,104				34,480
Total liabilities			5,585,182				5,393,070				4,866,885
Shareholders’ equity:
Preferred stock, $1 par value; $10 stated value; 10,000,000 shares authorized; 32,200, 32,200 and 44,800 shares issued and outstanding			322				322				448
Common stock, $1 par value; 100,000,000 shares authorized; 40,119,288, 40,019,853 and 38,407,874 shares issued			40,119				40,020				38,408
Common stock issuable; 16,549 and 9,948 shares as of March 31, 2006 and December 31, 2005, respectively			451				271				—
Capital surplus			195,382				193,355				154,535
Retained earnings			263,384				250,563				215,466
Treasury stock; 158,467 shares as of March 31, 2005, at cost			—				—				(3,074	)
Accumulated other comprehensive (loss) income			(14,244	)			(11,845	)			(6,897	)
Total shareholders’ equity			485,414				472,686				398,886
Total liabilities and shareholders’ equity		$	6,070,596			$	5,865,756			$	5,265,771

UNITED COMMUNITY BANKS, INC.
Average Consolidated Balance Sheets and Net Interest Analysis
For the Three Months Ended March 31,

		2006												2005
		Average								Avg.				Average								Avg.
(In thousands, taxable equivalent)		Balance				Interest				Rate				Balance				Interest				Rate
Assets:
Interest-earning assets:
Loans, net of unearned income (1)(2)		$	4,505,494			$	90,254				8.12	%		$	3,797,479			$	63,136				6.74	%
Taxable securities (3)			989,683				11,318				4.57				896,307				9,014				4.02
Tax-exempt securities (1) (3)			49,000				846				6.90				49,887				864				6.93
Federal funds sold and other interest-earning assets			30,535				379				4.96				76,288				635				3.33
Total interest-earning assets			5,574,712				102,797				7.47				4,819,961				73,649				6.18
Non-interest-earning assets:
Allowance for loan losses			(54,825	)											(48,155	)
Cash and due from banks			122,486												92,393
Premises and equipment			115,590												102,409
Other assets (3)			202,838												197,856
Total assets		$	5,960,801											$	5,164,464
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Transaction accounts		$	1,245,745				7,187				2.34			$	1,074,303				3,527				1.33
Savings deposits			175,796				228				.53				173,424				168				.39
Time deposits less than $100,000			1,270,078				12,035				3.84				995,389				6,462				2.63
Time deposits greater than $100,000			979,665				10,409				4.31				592,240				4,369				2.99
Brokered deposits			315,090				2,942				3.79				347,053				2,177				2.54
Total interest-bearing deposits			3,986,374				32,801				3.34				3,182,409				16,703				2.13
Federal funds purchased & other borrowings			128,602				1,476				4.65				139,574				885				2.57
Federal Home Loan Bank advances			586,722				6,629				4.58				770,715				5,657				2.98
Long-term debt			111,869				2,159				7.83				111,868				2,122				7.69
Total borrowed funds			827,193				10,264				5.03				1,022,157				8,664				3.44
Total interest-bearing liabilities			4,813,567				43,065				3.63				4,204,566				25,367				2.45
Non-interest-bearing liabilities:
Non-interest-bearing deposits			627,436												535,507
Other liabilities			40,838												26,227
Total liabilities			5,481,841												4,766,300
Stockholders’ equity			478,960												398,164
Total liabilities and stockholders’ equity		$	5,960,801											$	5,164,464
Net interest revenue						$	59,732											$	48,282
Net interest-rate spread											3.84	%											3.73	%
Net interest margin (4)											4.33	%											4.05	%